When will my student loan payments resume? Will there be a student loan forgiveness or cancellation?



Federal student loan payments are due to resume on October 1 following an unprecedented 19-month suspension that was introduced to provide financial assistance to borrowers during the pandemic.

Borrowers’ balances were effectively frozen for more than a year, with no federal loan payments required since March 2020, when Congress first sanctioned a suspension as part of one of its first major Covid relief packages.

During this time, interest stopped accumulating, saving the average borrower about $ 2,000 in the first year, and debt collection on outstanding debt was suspended.

The assistance is even more significant for those working in the public sector and may be eligible for loan forgiveness after 10 years. They still receive credit for those 10 years of mandatory payments, as if they kept making them during the pandemic, as long as they still work full time for suitable employers.

Both the pause in payments and the waiver of interest are automatic, but only applicable to federal-owned loans. This covers roughly 85% of all federal student loans, including what are known as federal direct loans and PLUS loans, that parents borrowed on behalf of their children. It does not include some federal loans that are guaranteed by the government, but do not technically belong to them. As a rule, they were paid before 2010.

More relief is unlikely

The pause in payments was originally supposed to remain in effect for seven months, but was extended by the Trump and Biden administrations. It is unlikely to be extended again as the economy recovers.

President Joe Biden extended the exemption from January to October 1, and also suspended the collection of outstanding loans from private lenders that had previously been excluded from protection.

But the effort isn’t enough for some Democratic leaders, including Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, who are calling for a sweeping waiver of $ 50,000 per borrower.

The move would be unprecedented, but a memo from the Harvard Legal Services Center and its Predator Student Lending Project says the Department of Education has the power to do so.

More moderate members of the Democratic Party may not support him. Research by the Committee on Responsible Federal Budgeting found that canceling student debt would give relatively little boost to the economy, and that much of the relief would go to those with higher incomes, who tend to have more debt.

Biden resists calls for debt relief

Biden has so far resisted the pressure, but said he would support the decision of Congress to cancel the $ 10,000 per borrower. He instructed Education Minister Miguel Cardone to write a memo on the presidential legality of debt cancellation, White House chief of staff Ron Klein said in an interview with Politico magazine last month.

Biden did not include a student debt cancellation clause in his $ 1.8 trillion US family plan, which calls for free community colleges and expand Pell grants for low-income college students.

Since taking office, Biden has provided some loan forgiveness to defrauded borrowers who attended commercial colleges, changing controversial Trump-era policies. The move results in the cancellation of approximately $ 1 billion in student debt. During the pandemic, the administration also refused to process paperwork to obtain permission to forgive loans to disabled borrowers.

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